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Canada’s Emissions Trends

3.0 Emissions Trends

3.1 Emissions Scenarios and Key Drivers

Greenhouse gas emissions in Canada are driven by a number of economic drivers (e.g., energy demand and supply mix, economic growth, among others). Looking ahead, projections of future emissions are greatly influenced by the underlying assumptions about the expected development of these economic drivers over time10. Changing assumptions about any of these factors will alter the future path of emissions.

The approach adopted for development of the emissions scenarios presented here relies on a baseline set of assumptions. In this respect, the economic projections are calibrated to those used by Finance Canada in the Fall 2010 Fiscal Update. The longer-term projections incorporate productivity growth projections developed in consultation with Finance Canada officials and Statistics Canada’s population growth projections. Similarly, forecasts of major energy supply projects (e.g., oil sands production, large hydro capacity expansions, nuclear refurbishment and additions) from Natural Resources Canada were incorporated. Supply forecasts are based on consultation with industry experts and reflect the most recent views regarding the evolution of Canada’s energy supply sector. The projections also incorporate data from the National Greenhouse Gas Emissions Inventory, the National Energy Board, and the U.S. Energy Information Administration. For a more detailed summary of key economic data and assumptions see Annex 1.

It is impossible to predict Canada’s greenhouse gas emissions with certainty, given the importance of the economic drivers and the intrinsic uncertainty related to these drivers (e.g. GDP, energy prices) in the future. Government policy also has a significant impact on emissions. In this respect, future emissions will be shaped by existing government measures, as well as future measures that will be implemented as part of Canada's plan to reduce emissions to the target established in the Copenhagen Accord of 607 Mt by 2020.

Taking into account the economic drivers described above, with no major technology changes and factoring in current government measures, results in a baseline scenario whereby emissions reach 785 Mt by 2020 (or 54 Mt) above 2005 levels.

Given the uncertainty regarding the economic drivers, this scenario should be seen as one estimate within a set of possible emissions outcomes in 2020, depending on economic developments. To get a sense of the sensitivity of emissions to economic developments, emissions were calculated under a series of alternative assumptions involving relatively minor variations in assumed economic growth rates for Canada and world oil prices.

For example, under a scenario of high GDP growth, high world oil prices and no further government action, Canadian emissions could reach almost 840 Mt by 2020. Alternatively, with GDP growth and world oil prices below the baseline scenario assumptions, 2020 emissions could be as low as 747 Mt. Figure 3 illustrates these alternative emissions pathways. For a more detailed explanation of this sensitivity analysis, see Annex 2.

These sensitivities illustrate that Canada’s emissions projections should not be interpreted as a prediction or forecast of our emissions future that will be determined by a range of as yet unknown developments in key economic drivers. Rather, the projections should be viewed as a mode of a distribution of scenarios that provides a reference point for evaluating the impact of economic and technological developments, as well as assessing the impact of existing and future government measures.

It is important to note that the projection of emissions in this scenario is based on existing government measures as of December 2010 only, and does not reflect the impact of federal measures that are under development as part of the government’s plan to reduce GHG emissions to 607 Mt by 2020, nor new provincial measures that could be undertaken in the future. The impact of government measures on emissions is described in more detail in a later section.

Table 2 Sensitivity of emissions to changes in GDP and world oil price

Emissions Projections by Sector

Emissions are estimated to have declined in 2008 and 2009 due to the global economic recession. The downturn in economic conditions contributed to a decline in emissions in major industrial sectors, including utility power generation sector and key EITE industries, such as iron and steel, smelting and refining, pulp and paper, metal mining, forestry, and chemicals and fertilizers.

As the economic recovery continues beyond 2010, total emissions are expected to begin to increase. Absent further government action, by 2020 emissions are projected to reach 785 Mt, an increase of 54 Mt from 2005.

Table 3 illustrates how the trends in each economic sector vary based on how economic drivers and government policies shape emissions in that sector. Electricity generation is the one major economic sector that is projected to reduce emissions significantly, in large part due to the combined impact of government measures to create a cleaner electricity system: Electricity emissions are projected to decline by 31 Mt (25%) between 2005 and 2020. On the other hand, increased production in the oil sands is expected to result in overall oil and gas emissions increasing by 46 Mt (30%) between 2005 and 2020.

Table 3 GHG emissions by economic sector (Mt CO2e)

2005

2020

Change,
2005 to 2020

Transportation

164

180

16

Electricity

126

95

-31

Oil and Gas

153

199

46

Emissions-Intensive Trade- Exposed Industries

80

81

1

Buildings

80

86

6

Agriculture

74

78

4

Waste and Others

54

66

12

Total

731

785

54

The following outlines in more detail projected trends in GHG emissions by sector and the economic drivers and government measures that affect them.

Transportation

Total transportation emissions are projected to increase by about 16 Mt from 164 Mt in 2005 to 180 Mt by 2020 — a marked deceleration of growth from the historical long-term trend. This deceleration is expected to occur as a result of higher gasoline and refined petroleum prices, and federal light duty vehicle emissions regulations.

Under these regulations, the fuel efficiency of passenger cars will increase by some 20 per cent. The sales-weighted fuel economy of passenger cars on the road is projected to improve from 9.7 to 7.8 litres/100 km by 2020. Likewise, emissions from freight are expected to decrease as a result of various federal, provincial and territorial programs. Under the baseline scenario, the average fuel efficiency of trucks improves from 5.8/100 tonne-km to 5.7 litres/100 tonne-km by 2020. (Note: This scenario does not incorporate the additional impact of upcoming federal regulations on heavy duty vehicles, as the specifics of these proposed regulations were still being finalized at the time the projections were prepared.)

As depicted in Table 4, the transportation sector is comprised of several distinct sectors – passenger, freight and air and others (e.g., rail and marine)11. Each sector exhibits different trends and responds to a very different mix of technological options. For example, emissions from passenger transportation are projected to decrease by 5 Mt between 2005 and 2020, while those for ground freight and off-road are projected to grow by 18 Mt.

Oil and Gas

Upstream Oil and Gas Production

Absent further government action, emissions from upstream oil and gas production, including pipelines but excluding refining and upgrading12, are estimated to grow from 120 Mt in 2005 to 142 Mt in 2020. This increase is primarily driven by the growth in bitumen production, where emissions are expected to increase from 16 Mt in 2005 to about 52 Mt by 2020.

Over this same period, emissions from conventional crude oil production are expected to fall from 31 Mt in 2005 to 22 Mt in 2020, while those from natural gas production and processing are expected to fall from about 53 Mt in 2005 to 52 Mt by 2020.

Emissions from the pipeline transport of oil and natural gas are expected to fall from about 20 Mt in 2005 to 16 Mt by 2020 (Table 5). The emissions associated with the upgrading of oil-sands bitumen13 are expected to rise from 14 Mt in 2005 to 40 Mt by 2020. Further details on emissions from oil-sands upgrading are reported in the section below dealing with the refining industry.

Petroleum Refining and Upgrading

Table 7 displays emissions associated with petroleum refining and upgrading. As noted above, the greenhouse gas emissions from upgrading bitumen into synthetic crude oil are included in the petroleum refining industry. From 2005 to 2020, emissions from bitumen upgrading are projected to increase by 26 Mt, while emissions from petroleum refining are projected to decline by 2 Mt.

Electricity Generation

Emissions from electricity generation and distribution have historically increased over time as a result of the need to increase generating output to supply a growing economy. However, emissions from this sector are now declining, and that trend is expected to continue over the next decade. Between 2005 and 2020, electricity generation emissions are expected to decrease by 31 Mt, from 126 Mt in 2005 to 95 Mt in 2020, primarily as a result of the federal Emissions Performance Standard for coal-fired electricity generation, as well as provincial measures to shift away from coal as a fuel source and measures to encourage the development of renewables.

Table 8 Electricity sector: emissions and drivers

2005

2008

2010

2020

Emissions (Mt CO2e)

126

120

107

95

Generation (TWh)

608

620

629

734

Against a backdrop of decreasing coal power usage, fossil fuel generation is expected to vary with the availability of electricity from hydro, nuclear and renewable power sources such as wind. Hydro power generation is expected to increase throughout Canada, although the growing demand for electricity in Alberta is expected to continue being met primarily through increased generation from coal and natural-gas-fuelled power plants14. On a national level, electricity generation from natural gas, a relatively cleaner form of energy, is expected to more than double between 2005 and 2020.

Table 9 Electricity generation: emissions by fuel type (Mt CO2e)

2005

2008

2010

2020

Change 2005 to 2020

Coal

98

96

78

55

-43

Refined Petroleum Products

9

5

3

5

-4

Natural Gas

18

17

24

33

15

Non-combustion

1

2

2

2

1

Total

126

120

107

95

-31

The proportion of utility electricity generation coming from wind power and other renewable sources (other than hydro and nuclear) increases in the 2005 to 2020 period, starting at only about 0.6 per cent in 2005 and reaching six per cent of total generation by 2020. These forms of electricity generation are assumed to be emissions free.

Emissions-Intensive and Trade-Exposed Industries

As shown in Tables 10 and 11, emissions in the emissions-intensive trade-exposed (EITE) industries (which includes, among others, pulp and paper, cement, iron and steel – Table 11 provides the full list of these industries) are expected to experience modest growth as the economy recovers in 2010 and onwards. By 2020 emissions are projected to slightly surpass 2005 levels, at 81 Mt.

Emissions remain virtually constant over the 2005 to 2020 projection period in most of the EITE subsectors, owing to modest growth and continued improvements in emission intensities. Emissions are expected to decrease in the pulp and paper subsector as a result of the long-term decline in production already underway in this area.

Buildings

Residential

As shown in Table 12, greenhouse gas emissions from the residential sector (e.g., houses, apartments and other dwellings) are expected to increase by 4 Mt between 2005 and 2020, rising to 46 Mt overall.

The number of households, which is a key driver of growth in residential sector emissions, is expected to increase by 2.8 million from 2005 to 2020 but residential emissions are almost flat throughout this period. This is largely due to federal and provincial measures aimed at increasing the energy efficiency of residential buildings (e.g., building code regulations and incentives/rebates for energy efficiency improvements).

Commercial

Greenhouse gas emissions from the commercial sector are expected to increase by 2 Mt from 2005 to 2020 to 40 Mt (Table 13), mainly as a result of expansion of commercial floor space. As in the residential sector, emissions growth in the commercial sector is significantly dampened by federal and provincial measures incorporated into this analysis, such as building code regulations, energy efficiency standards, and other programs.

While agriculture contributes some 10% of Canadian GHG emissions, it also has major potential for present and future carbon sequestration through practices such as “no-till” cultivation; and strategies to manage and capture emissions from livestock manure could help reduce overall emissions, while having the potential to provide a renewable source of electricity generation.

Waste and Others

This sector includes emissions from waste management as well as from non-emissions-intensive industrial sectors.

Emissions from waste management come from three sources: emissions from the decomposition of solid waste in landfill sites, emissions from waste in water and incineration of solid wastes. These emissions represent 3 percent of total GHG emissions. For these emissions, population and households are the main drivers. Provincial measures aimed at recycling and emissions capture from landfill sites are projected to help keep emissions growth below the growth in population and household formation.

Emissions from other industrial sectors represent a wide variety of operations and include construction, forestry as well as light-manufacturing facilities (e.g. food and beverage, and electronics). These industries are projected to grow significantly in the future, leading to expected emissions growth of 8 Mt between 2005 and 2020.

11There are many alternative approaches for treating and grouping the transportation activities. For example, passenger transportation could be included in the residential sectors. Likewise, moving of industrial freight could be included with each industry.